ELLIOTT WAVE ANALYSIS - Latest Market Commentary
Stock Indices
The S&P ended the week edging slightly away from record highs that traded at 2119.59 although activity was generally quiet whilst the latest U.S. GDP, Consumer Sentiment and Chicago PMI were released. An intra-hourly five wave impulse pattern is completing at current levels from 2041.88 so this would open the way for a modest retracement to begin the coming week prior to resuming higher afterwards. The larger pattern describes the Oct.’14 low from 1820.66 beginning a five wave impulse advance that currently locates prices in the middle of a 3rd wave – this means only temporary declines prior to continued upside acceleration. ###Ultimate targets remain towards 2257.49 although we anticipate this being reached sometime into mid-April. This upside target is equivalent to the Dow Jones (DJIA) futures trading towards 19500+/- and the Nasdaq 100 towards 4877.00+/-. In Europe, the Eurostoxx 50 is approaching the completion of a 3rd of 3rd wave within the larger impulse pattern developing from the Oct.’14 low. A counter-trend 4th wave is expected to begin the coming week to synchronise with a modest pullback for the S&P prior to resuming higher afterwards. The Xetra Dax is similarly unfolding into a 3rd wave high with the coming week expecting a 4th wave retracement to begin prior to continuing higher afterwards. In Asia, the Shanghai Composite index is trading higher in a 5th wave with upside targets to 3646.45+/- whilst India’s Nifty 50 unfolds also into a 5th wave with upside targets towards 9550.00+/-. A recurring theme of 5th wave upside action is replicated for Japan’s Nikkei with targets remaining unchanged towards 19500.00+/-. 2nd March 2015
Currencies (FX)
The US$ index traded higher during the latter half of last week and thereby exceeded the 9511 high that was vital to maintaining a double zig zag downswing from the January high of 9552. Although in principle it would be legitimate to assume that Thursday’s low of 9405 completed a multi-week contracting-symmetrical triangle, this cannot be replicated for the Euro/US$. Therefore, we have to assume that both the US$ index and the Euro/US$ are still engaged in the counter-trend corrections that began from the January price extremes. In the case of the US$ index, this implies that an expanding flat pattern is underway, with current price advances labelled as wave ‘b’ within this sequence and measured to upside at 9583-86. Once tested, a reversal ###signature should trigger wave ‘c’ declines in the weeks ahead, with ultimate downside measured to 9292. For the Euro/US$, the situation is similar but fib-price-ratio measurements suggest that a horizontal flat is unfolding. Wave ‘b’ of this pattern is projected to downside at 1.1107 prior to a finalising upswing back to the February high of 1.1534. Sterling underwent some interesting volatile price moves during the last trading days which might give the impression of a trend change. Yet the important fib-price-ratio projections have not been met and this suggests a continuation higher during the next few weeks. Both of our counts are still valid but the short-term structure differs significantly – whereas the scenario that advocates a five wave impulse sequence from the 1.4951 low depicts a finalising ending diagonal with upside to 1.5625, the count that shows a double zig zag upswing from 1.4951 interprets the recent price action from 1.5481 to 1.5384+/- as a running flat prior to a finalising rally to 1.5608+/-. No news on US$/Yen so far – we are still waiting for a last sell-off to 11727-11661 to complete the multi-week triangle and allow for additional upside in the months ahead. Ultimate objectives remain towards 12618. 2nd March 2015
Bonds (Interest Rates)
Last week’s trading was dominated by Janet Yellen’s statements to the Senate Banking Committee. She has stated that the Fed would soon delete the word ‘patient’ in describing its forward guidance on the timing of interest rate rises. But she was quick to add that the Fed were not on ‘automatic pilot’ to raise interest rates – rather, it was assessing the probability on a month-to-month basis. The US10yr yield traded higher following the statement from a low of 1.931 into Friday’s high of 2.052 before falling back towards the close at 2.000. Within the context of declines that began mid-February, this is seen as a temporary rally prior to continued declines. The US10yr yield is currently engaged in a 2nd wave corrective decline from 2.160 with the pattern taking the form ###of a zig zag. Interim downside targets remain unchanged towards 1.895 but ultimately extending to complete the pattern towards 1.748+/-. The medium-term outlook confirms a yield uptrend in progress. Meanwhile in Europe, a downtrend still prevails that began from the June ’08 high of 4.705% but more recently, the decline from the Sep.’13 high of 2.051 is described as completing a 3rd wave sequence with limited downside now as it approaches measured targets at 0.220%. The positive correlation between the US10yr yield and the DE10yr yield continues to fluctuate erratically basis the US10yr-DE10yr yield spread. For this reason, an attempt for the DE10yr yield to 0.220 is considered strong support even though the US10yr yield could stretch lower during the next month to continue narrowing the spread slightly even though a widening medium-term uptrend is in progress.2nd March 2015
Commodities
The US$ continues to remain close to its January highs and this is contributing to the downward progress of gold and silver. The depth of declines since forming highs last January with gold at 1307.40 confirms forecasts for lower lows during the next couple of months. The decline from the Aug.’13 high of 1434.05 is unfolding into an ending contracting-diagonal pattern with its 5th wave decline in progress from 1307.40. This must ultimately subdivide into a zig zag with interim downside targets for wave ‘a’ approaching completion. As we look slightly further ahead, ultimate downside targets for completing the diagonal pattern remain unchanged towards 1096.00-91.16+/-. Silver is equally unfolding into a five wave pattern from the Aug.’13 high of 25.12 but instead of a diagonal, it is unfolding into a five wave expanding-impulse pattern. But like gold, its 5th wave began a final decline from the Jan.’15 high of 18.49. So far, the subdivision of this 5th wave labels a series of 1-2’s prior to 3rd of 3rd acceleration. This is not expected to begin for another week or two as a counter-trend upswing is expected beforehand. Crude oil continues to plot two short-term scenarios for the next several weeks. ###The bullish count depicts the end of a 4-year counter-trend pattern as primary wave B into the late-Jan.’15 low at 43.58 but the new uptrend now in progress beginning with its 1st wave ending at 54.24 and a 2nd wave now in progress to 45.00+/-. The bearish count depicts the Jan.-Feb.’15 upswing ending at 54.24 as a counter-trend expanding flat with an additional but finalising 5th wave decline now in progress to 37.58+/-. A test to 45.00+/- will determine which ultimately prevails but we currently assign the bullish scenario as preferential status basis Brent oil’s advance from the Jan.’15 low unfolding into a five wave pattern. 2nd March 2015
